The 4th anniversary of COVID is weeks away and 2023 has been eventful. We’ve seen a new war in addition to Ukraine, significantly higher prices of goods & services, inflation at 30+ year highs, 14 interest rate rises since December 2021 and a “fixed interest rate cliff’ with borrowers paying 6% up from lows of 2% literally overnight. The AUD declined to a low of 0.63 USD, we saw critically low overseas student enrolments combined with widespread worker and labor shortages triggering a federal government policy response of opening the borders with significantly higher net migration (circa 500,000 new arrivals) being the largest in decades fueling increased demand (& prices) for housing, cars, services consequently exacerbating inflation – contrary to many economists and investment managers who forecast the economy to find equilibrium via an economic downturn in 2023.
More globally, the release of ChatGPT & AI sent the technology sector soaring, creating a large performance divergence to the traditional segments of financials & resources and between large & small company valuations. During the same period, so called “defensive Bonds” recorded negative returns not seen since 1994. The combination of all these factors has seen the rise in popularity of ‘The Bank of Mum and Dad’ with an article on the next page.
As we ponder 2024, we reflect on a few quotes from Charlie Munger (long time business partner of Warren Buffet) who died aged 99 in November 2023, who said “I don’t make money predicting accurately. We get into good businesses and tend to stay there” and “People have always had this craving to have someone tell them the future. There’s always a market for people who pretend to know the future”.
This quote has proved true through 2023 and reinforces our 25+ year observation that more money (or opportunity) is forgone waiting for “prices to go down” verse investing sooner and maintaining a strategy aligned to a specific individual goals and timeframes. We say this noting cash has an important place in a portfolio and whilst returns have risen to 5% after paying income tax, the net cash return remains below inflation and hence too much cash (despite higher rates) continues to be the enemy of an investor seeking to maintain their purchasing power and ultimately maintain their quality of living.
In 2024 we can say with certainty we will see legislated tax changes to superannuation for large balances (see next page) and assuming the legislated stage 3 tax cuts commence there will be impacts to many client strategies to plan for in the coming year which we look forward to discussing with you in due course. Until then we value our partnership with you, and we wish you a wonderful summer holiday period and as always please call or email us if you have any questions or if we can assist any friends who want to work with a partner like us to make smarter financial decisions.